Following an investigation, the U.S. Department of Labor (DOL) obtained a consent judgment in its lawsuit against La Tolteca Authentic Mexican Restaurant, requiring the restaurant and its owner to pay $1.3 million.
The DOL alleged the Pennsylvania restaurant and its owner engaged in pay practices that "illegally deprived workers of their full wages."
The DOL's Wage and Hour Division (WHD) investigated and determined that the restaurant and its owner "violated the Fair Labor Standards Act (FLSA) by requiring servers and bartenders to surrender a percentage of their tips, based on their total sales, to the restaurant at each shift's end, instead of contributing them to a valid tip pool." The employers also allegedly failed to record how the tips were used.
The investigators also found the employers failed to pay three non-exempt salaried cooks overtime wages as required by law.
The consent judgment requires the restaurant and its owner to pay $651,778 in back wages and withheld tips, plus and equal amount in liquidated damages, to 51 workers. The employers must also pay a $26,443 civil monetary penalty because of the "willful nature of the violations."
The consent judgment also permanently forbids the employers from violating the FLSA in the future. "La Tolteca Authentic Mexican Restaurant to Pay $1.3M" www.stl.news (Aug. 25, 2024).
Commentary
The DOL is increasingly taking action against employers that wrongfully withhold tips from their tipped employees, like the one in the source article.
In fiscal year 2023, the DOL recovered $4,429,962 in back wages for tip related violations, a notable increase from $3,320,814 in fiscal year 2022 and $2,043,416 in fiscal year 2021.
The number of employees receiving back wages for tip related violations also increased substantially, from 4,188 in fiscal year 2021, to 4,686 in fiscal year 2022, to 6,645 in fiscal year 2023. "Fair Labor Standards Act" www.dol.gov.
The DOL has already resolved a number of tip related wage and hour cases this year, and it seems unlikely the risk will abate anytime soon.
To help avoid a tip related DOL lawsuit, employers must follow all requirements for paying tipped employees contained in the FLSA, including never keeping any employee tips, whether directly or through a tip pool. It is illegal under the FLSA for an employer to require an employee to give part of their tips to the employer, a supervisor, or a manager. "Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (FLSA)" www.dol.gov.
If you require employees to pool tips, make sure you do so in accordance with FLSA requirements. In addition to consulting the DOL's fact sheet, it is best practice to have an employment attorney review your practices around tip sharing and paying tipped employees.
